Two new reports seem to show that when it comes to hiring and salary negotiations, jobseekers and employees might have the advantage. But what if the prevailing theory about wage growth is false?
The economy works in cycles, except when it doesn’t. That’s about as helpful an answer as you’re going to get when you ask an economist about persistently stagnant wages. So are two new reports a sign that wages are finally going to rise, or are low wages now a reality?
Job ads are on the rise
The first report comes from Seek, which has found that ads on their platform are up 13.2 per cent compared to this time a year ago – the best conditions jobseekers have faced since 2010.
Not all industries have seen an increase in job ads. Jobs in banking and financial services, insurance and superannuation, and advertising media and the arts are all down from last year.
The biggest increase in job ads is in the mining, resources and energy sector which has 72 per cent more than 12 months ago. A distant second are job ads in science and technology, which have increased by 36 per cent.
Relevant to HR professionals looking to change roles: consulting and strategy and HR and recruitment are doing well, up by 34 per cent and 26 per cent respectively.
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“These positive trends in advertising on SEEK point to an improving labour market and suggests that positive economic momentum, evident in the June quarter National Accounts GDP Report, is continuing into the second half of the year,” says Michael Ilczynski, Managing Director for SEEK Australia and New Zealand.
Employees look for a pay increase
The other report is the CEB global talent monitor, which surveys 22,000 workers and candidates in 40 countries in an attempt to figure out how they feel about the economy. Going on its metrics, Australian workers’ expectations of base pay have recently increased.
According to the talent monitor, in Q2 Australian workers’ expectations of base pay have gone up 2.5 per cent since last quarter, and are now at the highest level they’ve been at since 2011.
This increase ties in with Seek’s report.
“The spike in pay expectations comes as business indicators, including employment, profitability and trade, have all seen growing momentum over the last quarter, buoying employee confidence,” says Aaron McEwan, HR advisory leader at CEB, now Gartner.
“After years of riding out low wage growth, workers are now hopeful that their base pay will start to see the flow-on effect from the positive business conditions surrounding them,” he added.
But should workers be hopeful? Some economists are starting to question the theory that wage growth tracks with employment rates. In the US unemployment is quite low but wages are not adjusting in the way the theory predicts.
If the underlying foundations that made this theory sound are no longer true then, according to economics writer Jason Murphy on news.com.au, some likely reasons for the change are the increasingly well-educated labour forces in India and China, as well as the rise of automation.
This makes sense, and is something HRM has reported on before. Facing the prospect of having to pay workers more in a tight labour market, can encourage organisations to deploy technology that reduces the need for a larger workforce.
It’s too early to say whether the theory is actually broken but it’s something to keep in mind. In the meantime, McEwan says the global talent monitor also shows employees’ discretionary effort is increasing (up by 5 per cent this quarter) in line with salary expectations. In other words, they’re working harder in anticipation of a raise. So organisations should take advantage, with one caveat.
“Employees are ready to challenge the wall of silence around pay, and organisations need to be on the front foot to ensure that there are clear lines of communication around pay and rewards as part of their employee value proposition,” says McEwan.